UPDATE 6-Oil prices drop sharply, equities and supply weigh

Fri May 31, 2013 8:53pm BST

* OPEC members leave output target unchanged

* U.S. oil supply at record

* Brent, U.S. crude post losses in May vs April (Adds details, settlement prices.)

By Jeanine Prezioso

NEW YORK, May 31 (Reuters) - Oil prices fell sharply on both sides of the Atlantic late on Friday, pulled down by declines in major U.S. equity indices, large supplies, a weak demand outlook, and by technical selling that developed when support levels were pierced.

U.S. crude oil futures fell 1.75 percent, or $1.64, to settle at $91.97 per barrel, settling below the 200-day moving average for the first time in a month. For the months of May, U.S. crude futures were down 1.6 percent from April.

Brent crude oil futures settled down $1.80, or 1.76 percent, at $100.39 per barrel. For the month of May Brent crude was down 1.93 percent compared to April.

The S&P 500 was down a half a percent on late Friday afternoon and was on track for a weekly decline, which weighed on oil prices, brokers said.

Earlier in the session, crude oil prices dipped on news that TransCanada Corp said its 590,000-barrel-per-day Keystone pipeline, which delivers Alberta crude to Illinois and benchmark U.S. supply point Cushing, Oklahoma, had restarted.

This underscored the ample supplies of oil in the market, which will eventually sink prices if demand does not catch up, analysts said. U.S. government data on Thursday showing crude stocks at a record high.

The Organization of the Petroleum Exporting Countries on Friday kept its output target unchanged at 30 million barrels per day, as expected, given that market prices are in line with top producer Saudi Arabia's preferred level of $100 a barrel.

Weak economic data worried traders that demand would remain anaemic.

Data from China, the world's second largest oil consumer, due out Saturday is expected to show manufacturing activity barely expanded in May, according to a Reuters poll.

U.S. consumer spending fell in April for the first time in almost a year, data showed. Euro zone figures released during the session showed unemployment in the 17-country bloc reached a new high last month.

Traders and investors are waiting to see whether the U.S. Federal Reserve continues its monetary stimulus program, keeping interest rates low and supporting oil prices.

Even so, "bearish oil balances" will eventually become "too difficult to ignore" and will send prices lower, Jefferies Bache oil analysts said. "In the meantime, some more choppy price action with a downward bias would appear to lie ahead." (Additional reporting by Jessica Donati in London, Robert Gibbons in New York and Manash Goswami; editing by Richard Pullin, Keiron Henderson, Dale Hudson and Bob Burgdorfer)

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